UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
{ X } Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Quarterly Period Ended March 31, 2000 or
{ } Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition period from ____________ to
___________
Commission File Number: 0-23605
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CAVALRY BANCORP, INC.
--------------------------------
(exact name of registrant as specified in its charter)
Tennessee 62-1721072
- -------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) I.D. Number)
114 West College Street, Murfreesboro, Tennessee 37130
------------------------------------------------ -----------------
(Address of principal executive offices) (Zip Code)
(615) 893-1234
-----------------------
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock Issued and Outstanding: 7,104,801 as of May 5, 2000.
<PAGE>
CAVALRY BANCORP, INC.
Table of Contents
Part I Financial Information Page
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 2000 (unaudited)
and December 31, 1999 1
Consolidated Statements of Income (unaudited) for the
Three Month Periods Ended March 31, 2000 and 1999 2
Consolidated Statements of Comprehensive Income (unaudited)
for the Three Month Periods Ended March 31, 2000 and 1999 3
Consolidated Statements of Cash Flows (unaudited) for the
Three Month Periods Ended March 31, 2000 and 1999 4
Notes to Consolidated Financial Statements (unaudited) 5-6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 10-11
Part II Other Information 12
Signatures 13
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CAVALRY BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 (UNAUDITED) AND DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
ASSETS March 31, 2000 December 31, 1999
- --------------------------------------------- ---------------- -------------------
(Unaudited)
<S> <C> <C>
Cash. . . . . . . . . . . . . . . . . . . . . $ 15,269 $ 20,043
Interest-bearing deposits with
other financial institutions. . . . . . . 25,482 74,379
---------------- -------------------
Cash and cash equivalents . . . . . . . . . . 40,751 94,422
Investment securities available-for-sale
at fair value
(amortized cost: $23,890 and $6,968 at
March 31, 2000 and
December 31, 1999, respectively) . . . . . 23,843 6,964
Mortgage-backed securities held
to maturity - at
amortized cost (fair value:
$629 and $645 at March 31, 2000 and
December 31, 1999, respectively) . . . . . 636 651
Loans held for sale, at estimated fair value. 6,999 4,485
Loans receivable, net . . . . . . . . . . . . 273,374 272,211
Accrued interest receivable . . . . . . . . . 2,014 1,784
Office properties and equipment, net. . . . . 12,302 9,892
Federal Home Loan Bank of Cincinnati
stock - at cost. . . . . . . . . . . . . . 1,911 1,878
Real estate and other assets acquired in
settlement of loans. . . . . . . . . . . . 80 166
Other assets. . . . . . . . . . . . . . . . . 2,617 2,966
---------------- -------------------
Total assets. . . . . . . . . . . . . . . . . $ 364,527 $ 395,419
================ ===================
LIABILITIES AND EQUITY
- ---------------------------------------------
Liabilities:
Deposits. . . . . . . . . . . . . . . . . . . $ 320,969 $ 308,929
Borrowings. . . . . . . . . . . . . . . . . . 1,615 45,000
Accounts payable and other liabilities. . . . 2,133 2,725
---------------- -------------------
Total liabilities. . . . . . . 324,717 356,654
---------------- -------------------
Shareholders' Equity:
Preferred stock, no par value
Authorized- 250,000 shares; none
issued or outstanding at
March 31, 2000 and December 31, 1999. . . - -
Common stock, no par value
Authorized- 49,750,000 shares; issued
and outstanding 7,104,801 at
March 31, 2000 and December 31, 1999 . . 11,145 10,972
Retained earnings . . . . . . . . . . . . . . 37,666 37,194
Unearned restricted stock . . . . . . . . . . (4,127) (4,380)
Unallocated ESOP Shares . . . . . . . . . . . (4,846) (5,019)
Accumulated other comprehensive
loss, net of tax. . . . . . . . . . . . . (28) (2)
---------------- -------------------
Total Equity. . . . . . . . . . . . . . 39,810 38,765
---------------- -------------------
Total Liabilities and Equity . . . . . . . . $ 364,527 $ 395,419
=============== ==================
</TABLE>
Note: The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes to consolidated financial statements.
1
<PAGE>
<TABLE>
<CAPTION>
CAVALRY BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
2000 1999
---------- ----------
<S> <C> <C>
Interest and dividend income:
Loans . . . . . . . . . . . . . . . $ 6,128 $ 5,643
Investment securities . . . . . . . 292 670
Deposits with other financial
institutions . . . . . . . . . . 549 491
Mortgage-backed securities
held to maturity . . . . . . . . 10 9
---------- ----------
Total interest and dividend
income . . . . . . . . . . 6,979 6,813
---------- ----------
Interest expense - deposits. . . . . 2,978 2,337
Interest expense - borrowings. . . . 130 -
---------- ----------
Total interest expense . . . . 3,108 2,337
---------- ----------
Net interest income . . . . . . . . 3,871 4,476
Provision for loan losses . . . . . 74 89
---------- ----------
Net interest income after
provision for loan losses . . . 3,797 4,387
---------- ----------
Non-interest income:
Servicing income . . . . . . . . . 64 71
Gain on sale of loans, net . . . . 314 441
Deposit servicing fees and charges 561 424
Trust service fees . . . . . . . . 267 205
Other operating income . . . . . . 138 77
---------- ----------
Total non-interest income. . . . 1,344 1,218
---------- ----------
Non-interest expenses:
Compensation, payroll taxes and
fringe benefits . . . . . . . . 2,338 2,068
Occupancy expense . . . . . . . . 156 168
Supplies, communications and
other office expenses . . . . . 211 231
Federal insurance premiums. . . . 15 37
Advertising expense . . . . . . . 90 67
Equipment and service bureau
expense. . . . . . . . . . . . 498 584
Other operating expense . . . . . 378 359
---------- ----------
Total non-interest expenses. . 3,686 3,514
---------- ----------
Earnings before income tax
expense . . . . . . . . . . . 1,455 2,091
Income tax expense . . . . . . . . 627 863
---------- ----------
Net income. . . . . . . . . . . $ 828 $ 1,228
---------- ----------
Basic earnings per share . . . . . . $ 0.13 $ 0.19
========== ==========
Weighted average
shares outstanding. . . . . . . . 6,340,984 6,607,533
========== ==========
</TABLE>
Dividends declared $0.05 per share payable April 14, 2000 for shareholders of
record date March 31, 2000.
See accompanying notes to consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
CAVALRY BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
2000 1999
------ -------
<S> <C> <C>
Net income. . . . . . . . . . . . . . . . . . . . . . . . . $ 828 $1,228
Other comprehensive income, net of tax
Unrealized losses on securities
available for sale . . . . . . . . . . . . . . . . . . . . ( 26) (36)
------ -------
Comprehensive income. . . . . . . . . . . . . . . . . . . . $ 802 $1,192
====== =======
See accompanying note to consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CAVALRY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
2000 1999
--------- ---------
<S> <C> <C>
Operating activities:
Net cash provided (used) by operating activities . ($1,601) $ 3,139
--------- ---------
Investing activities:
Increase in loans receivable, net . . . . . . . . . . . . (1,132) (6,949)
Principal payments on mortgage
backed securities held to maturity . . . . . . . . . 15 153
Purchase of investment securities
available for sale. . . . . . . . . . . . . . . . . . . (21,843) (25,083)
Proceeds from maturities of investment securities. . . . . 5,000 19,500
Purchase of office properties and equipment . . . . . . . (2,636) (246)
--------- ---------
Net cash used in investing activities. . . . . . . (20,596) (12,625)
--------- ---------
Financing activities:
Net increase in deposits . . . . . . . . . . . . . . . . . 12,040 300
Dividends paid . . . . . . . . . . . . . . . . . . . . . . (355) (358)
Net increase (decrease) in borrowings. . . . . . . . . . . . (43,385) -
Payments by borrowers for
property taxes and insurance . . . . . . . . . . . . . . . 226 201
--------- ---------
Net cash provided by (used in)
financing activities. . . . . . . . . . . . . . . . (31,474) 143
--------- ---------
Decrease in cash and cash equivalents. . . . . . . . . . . . (53,671) (9,343)
Cash and equivalents, beginning of period. . . . . . . . . . 94,422 53,188
--------- ---------
Cash and cash equivalents, end of period. . . . . . . . . . $ 40,751 $ 43,845
--------- ---------
SUPPLEMENT DISCLOSURES OF CASH
FLOW INFORMATION:
Payments during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,045 $ 2,302
========= =========
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . $ 981 $ 522
========= =========
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Interest credited to deposits . . . . . . . . . . . . . . . $ 1,045 $ 959
========= =========
Increase in deferred tax asset related
to unrealized loss on investments . . . . . . . . . . . . $ 17 $ 22
========= =========
Net unrealized losses on investment
securities available for sale. . . . . . . . . . . . . . $ (43) $ (58)
========= =========
Dividends declared and payable . . . . . . . . . . . . . . . $ 355 $ 358
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
CAVALRY BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
Cavalry Bancorp, Inc. (the "Company"), a Tennessee corporation, is the holding
company for Cavalry Banking (the "Bank") which is a federally chartered stock
savings bank.
The accompanying consolidated financial statements of the Company have been
prepared in accordance with Instructions to Form 10-Q. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. However, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results for the interim periods.
The results of operations for the three months ended March 31, 2000, are not
necessarily indicative of the results to be expected for the year ending
December 31, 2000. The consolidated financial statements and notes thereto
should be read in conjunction with the audited financial statements and notes
thereto for the year ended December 31, 1999.
2. Earnings Per Share
Earnings per share has been computed for the three months ended March 31, 2000,
based upon weighted average common shares outstanding of 6,340,984. Earnings
per share has been computed for the three months ended March 31, 1999, based
upon weighted average common shares outstanding of 6,607,533.
Statement of Financial Accounting Standards No. 128, Earnings Per Share,
established new standards for computing and presenting earnings per share. The
standard is effective for annual and interim periods ending after December 31,
1997. The Company had no dilutive securities, therefore diluted earnings per
share is the same as basic earnings per share.
3. Business Segments
The Company and its subsidiary provide community oriented banking services to
individuals and businesses primarily within Rutherford, Bedford, and Williamson
counties in Middle Tennessee.
The Company's segments are identified by the products and services offered,
principally distinguished as banking, trust and mortgage banking operations.
Approximately 30% of mortgage banking revenues are derived each year from
transactions with agencies of the U.S. government. In addition, one unrelated
entity purchased approximately 50% of mortgages sold in 2000 and 1999.
5
<PAGE>
Segment information is derived from the internal reporting system utilized by
management with accounting policies and procedures consistent with those
described in Note 1 of the 1999 Annual Report to Shareholders. Segment
performance is evaluated by the Company based on profit or loss before income
taxes. Revenue, expense and asset levels reflect those which can be
specifically identified and those assigned based on internally developed
allocation methods. These methods have been consistently applied.
<TABLE>
<CAPTION>
Mortgage
Banking Banking Trust Consolidated
<S> <C> <C> <C> <C>
For the quarter ended
March 31, 2000
Interest revenue. . . . . . . $ 6,979 $ - $ - $ 6,979
Other income-
external customers . . . 699 64 267 1,030
Interest expense. . . . . . . 3,108 - - 3,108
Depreciation and amortization 172 33 9 214
Other significant items:
Provision for loan losses. 74 - - 74
Gain on sales of assets . . - 314 - 314
Segment profit. . . . . . . . 1,440 (52) 67 1,455
Segment assets. . . . . . . . 357,634 6,496 397 364,527
</TABLE>
<TABLE>
<CAPTION>
Mortgage
Banking Banking Trust Consolidated
<S> <C> <C> <C> <C>
For the quarter ended
March 31, 1999
Interest revenue. . . . . . . . $ 6,813 $ - $ - $ 6,813
Other income-external customers 501 71 205 777
Interest expense. . . . . . . . 2,337 - - 2,337
Depreciation and amortization . 210 52 11 273
Other significant items:
Provision for loan losses. . 89 - - 89
Gain on sales of assets . . . - 441 - 441
Segment profit. . . . . . . . . 1,854 195 42 2,091
Segment assets. . . . . . . . . 359,140 7,263 180 366,583
</TABLE>
6
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Private Securities Litigation Reform Act Safe Harbor Statement
This Quarterly Report contains forward-looking statements within the
meaning of the federal securities laws. These statements are not historical
facts, rather statements based on the Company's current expectations regarding
its business strategies and their intended results and its future performance.
Forward-looking statements are preceded by terms such as "expects," "believes,"
"anticipates," "intends," and similar expressions.
Forward-looking statements are not guarantees of future performance.
Numerous risks and uncertainties could cause the company's actual results,
performance, and achievements to be materially different from those expressed or
implied by the forward-looking statements. Factors that may cause or contribute
to these differences include, without limitation, general economic conditions,
including changes in market interest rates and changes in monetary and fiscal
policies of the federal government; legislative and regulatory changes; and
other factors disclosed periodically in the Company's filings with the
Securities and Exchange Commission.
Because of the risks and uncertainties inherent in forward-looking
statements, readers are cautioned not to place undue reliance on them, whether
included in this report or made elsewhere from time to time by the Company or on
its behalf. The Company assumes no obligation to update any forward-looking
statements.
Comparison of Financial Condition at March 31, 2000 and December 31, 1999
Total assets were $364.5 million at March 31, 2000, compared to $395.4 million
at December 31, 1999, a decrease of $30.9 million or 7.8 %. This decrease was a
result of cash being used to reduce borrowings from $45.0 million to $1.6
million. This decrease was partially offset by an increase in cash from
increased deposits. Cash and cash equivalents decreased from $94.4 million at
December 31, 1999, to $40.8 million at March 31, 2000. This decrease was
primarily a results of cash used to retire $45.0 million in borrowings.
Investments available for sale increased from $7.0 million at December 31, 1999,
to $23.8 million at March 31, 2000, as a result of increased deposits. Loans
receivable net increased $1.2 million from $272.2 million at December 31, 1999
to $273.4 million at March 31, 2000.
Deposit accounts increased $12.1 million from $308.9 million at December 31,
1999, to $321.0 million at March 31, 2000. Certificates of deposit increased
$2.0 million from $151.0 million at December 31, 1999 to $153.0 million at March
31, 2000. Savings deposits increased $1.1 million from $13.0 million at
December 31, 1999 to $14.1 million at March 31, 2000. Money market accounts
increased $3.4 million from $63.8 million at December 31, 1999 to $67.2 million
at March 31, 2000. Transaction accounts increased $4.9 million from $34.7
million at December 31, 1999 to $39.6 million at March 31, 2000. These
increases were primarily a result of an ongoing effort to raise the deposit base
for Cavalry Banking.
Stockholders' equity increased by $1.0 million from $38.8 million at December
31, 1999, to $39.8 million at March 31, 2000, as a result of net income of
$828,000 for the three months ended March 31, 2000 release of ESOP shares of
$346,000 and release of Management Recognition Plan (MRP) shares of $253,000.
These increases were offset by dividends declared of $355,000 and an increase in
unrealized losses on available-for-sale securities of $26,000.
7
<PAGE>
Nonperforming assets were $499,000 at December 31, 1999 and $219,000 at March
31, 2000.
Comparison of Operating Results for the Three Months Ended March 31, 2000 and
March 31, 1999.
Net Income. Net income decreased to $828,000 for the three months ended March
31, 2000, from $ 1.2 million for the three months ended March 31, 1999,
primarily as a result of a lower net interest income, increased interest and
non-interest expenses. These increased expenses were offset partially by an
increase in interest and dividend income, a decline in the provision for loan
losses and increased non-interest income. The decline in net interest income
was primarily a result of the impact of the decline in cash equivalents used to
fund the special cash distribution of $53.3 million, which was paid in December
1999.
Net Interest Income. Net interest income declined $600,000 from $4.5 million
for the three months ended March 31, 1999 to $3.9 million for the three months
ended March 31, 2000. This decline was a result of earning assets being
utilized to fund the special cash distribution paid in December 1999. This
distribution resulted in a decline in the ratio of average interest-earning
assets to average interest-bearing liabilities from 144.49% for the three month
period ended March 31, 1999 to 116.41% for the three months ended March 31,
2000.
Interest income increased 2.9% to $7.0 million for the three months ended March
31, 2000, from $6.8 million for the same period in 1999. Interest on loans
increased from $5.6 million for the period ended March 31, 1999, to $6.1 million
for the same period in 2000. This was a result of average loans outstanding
increasing from $249.5 million for the three months ended March 31, 1999, to
$274.7 million for the same period in 2000. The average yield decreased from
9.05% for the three period ended March 31, 1999 to 8.92% for the same period in
2000. This decline was a result of lower amortization of deferred fees due to
increased competitive pressures. These market pressures also attributed to the
slight decline in yield. Income on all other investments consisting of mortgage
backed securities, investments, FHLB stock, bank deposits and federal funds
declined from $1.2 million for the three month period ended March 31, 1999 to
$851,000 for the same period in 2000. Average investments decreased from $87.6
million for the three months ended March 31, 1999, to $56.4 million for the same
period in 2000. The average yield increased from 5.35% for the three months
ended March 31, 1999 to 6.06% for the same period in 2000. This increase in
rate was a result of rising rates while the decline in volume was a result of
funds used to pay the special cash distribution in December 1999.
Interest expense increased from $2.3million for the three months ended March 31,
1999 to $3.1 million for the same period in 2000. Average deposits increased
from $233.3 million for the three months ended March 31, 1999 to $275.6 million
for the same period in 2000. This increase was a result of continuing efforts
to increase market share of deposits. The average cost of deposits increased
from 4.06% for the three months ended March 31, 1999, to 4.35% for the same
period in 2000. Average borrowings were $8.9 million at an average cost of
5.90% for the three months ended March 31, 2000. There were no borrowings
outstanding during the first three months of 1999. The total cost of funds
increased from 4.06% for the three months ended March 31, 1999 to 4.43% for the
three months ended March 31, 2000. Average interest-bearing liabilities
increased from $233.3 million for the three months ended March 31, 1999 to
$284.5 million for the same period in 2000. Interest rate spread decreased from
4.02% for the three months ended March 31 1999 to 4.00% for the same period in
2000. Net interest margin decreased from 5.31 % for the three months ended
March 31, 1999, to 4.68% for the same period in 2000.
8
<PAGE>
Provision for Loan Loses. Provision for loan losses are charges to earnings to
bring the total allowance for loan losses to a level considered by management as
adequate to provide for estimated loan losses based on management's evaluation
of the collectibility of the loan portfolio, including the nature of the
portfolio, credit concentrations, trends in historical loss experience, specific
impaired loans and economic conditions. Management also considers the level of
problem assets giving greater weight to the level of classified assets than to
the level of nonperforming assets because classified assets include not only
nonperforming assets but also performing assets that otherwise exhibit, in
management's judgement, potential credit weaknesses.
The provision for loan losses was $74,000 for the period ending March 31, 2000
compared to $89,000 for the same period in 1999. The decrease in the provision
was a result of a smaller increase in total loans outstanding between the two
quarters. Management deemed the allowance for loan losses adequate at March 31,
2000.
Noninterest Income. Noninterest income increased from $1.2 million for the
three months ended March 31, 1999 to $1.3 million for the same period in 2000.
In the mortgage banking segment net gain on sale of loans decreased from
$441,000 for the three months ended March 31,1999 to $314,000 for the same
period in 2000. This decrease was a result of fewer loan sells during the three
months ended March 31, 2000 compared to the same period in 1999. Loan servicing
fees also declined from $71,000 for the three months ended March 31, 1999, to
$64,000 primarily as a result of increased amortization of originated servicing
rights. In the banking segment deposit fees and other operating incomes
increased from $501,000 for the three months ended March 31, 1999, to $699,000
for the same period in 2000. This increase was primarily as result of growth in
the number of transaction accounts. In the trust segment trust fees increased
from $205,000 for the months ended March 31, 1999, to $267,000 for the same
period in 2000 as a result of increased fees and more trust assets under
management.
Noninterest Expense. Noninterest expense was $3.7 million for the three-month
period ended March 31, 2000 compared to $3.5 million for the same period in
1999. Compensation and other employee benefits increased from $2.1 million for
the three-month period ended March 31, 1999 to $2.3 million for the same period
in 2000. This increase was primarily a result of the MRP stock incentive plan,
which was approved at the annual meeting in April 1999. The increases in other
categories of operating expenses generally are attributable to the growth of the
Company. The Company anticipates that other operating expenses will continue to
increase in subsequent periods as a result of increased cost associated with
operating a public company.
Income taxes. The provision for income taxes was $627,000 for the period
ended March 31, 2000 compared to $863,000 for the same period in 1999. This
decrease was primarily a result of lower income before taxes.
Liquidity and Capital Resources
The Company's primary sources of funds are customer deposits, proceeds from loan
principal and interest payments, and the sale of loans, maturing securities and
FHLB of Cincinnati advances. While maturities and scheduled amortization of
loans are a predictable source of funds, deposit flows and mortgage prepayments
are influenced greatly by general interest rates, other economic conditions, and
competition. Regulations of the Office of Thrift Supervision ("OTS"), the
9
<PAGE>
Bank's primary regulator, require the Bank to maintain an adequate level of
liquidity to ensure the availability of sufficient funds to fund loans
originations, deposit withdrawals and to satisfy other financial commitments.
Currently, the OTS regulatory liquidity for the Bank is the maintenance of an
average daily balance of liquid assets (cash and eligible investments) equal to
at least 4% of the daily balance of net withdrawal deposits and short-term
borrowings. This liquidity requirement is subject to periodic change. The
Company and the Bank generally maintain sufficient cash and short-term
investments to meet short-term liquidity needs. At March 31, 2000, cash and
cash equivalents totaled $40.8 million or 11.2% of total assets, and investments
available -for -sale of $23.8 million. At March 31, 2000, the Bank also
maintained, but did not draw upon, a line of credit with the FHLB of Cincinnati
in the amount of $10.0 million.
As of March 31, 2000, The Bank's regulatory capital was in excess of all
applicable regulatory requirements. At March 31, 2000, under regulations of the
OTS, the Bank's actual tangible, core and risk-based capital ratios were 10.88%,
10.88% and 12.58%, respectively, compared to requirements of 1.5%, 3.0% and
8.0%, respectively.
At March 31, 2000, the Bank had loan commitments of approximately $45.5 million.
In addition, at March 31, 2000, the unused portion of lines of credit extended
by the Bank was approximately $8.4 million consumer and $31.5 million
commercial. Standby letters of credit and financial guarantees are conditional
commitments issued by the Bank to guarantee the performance of a customer to a
third party. Those guarantees are primarily issued to support public and
private borrowing arrangements, including commercial paper, bond financing, and
similar transactions. Most guarantees extend from one to two years. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers. At March 31, 2000, the Bank
had $7.6 million of letters of credit outstanding.
Impact of Inflation and Changing Prices
The consolidated financial statements of the Company and notes thereto,
presented elsewhere herein, have been prepared in accordance with GAAP, which
require the measurement of financial condition and operating results in terms of
historical dollars without considering the change in relative purchasing power
of money over time due to inflation. The impact of inflation is reflected in
the increased cost of the Company's operations. Unlike most industrial
companies, nearly all the assets and liabilities of the Company are financial.
As a result, interest rates have a greater impact on the Company's performance
than do the effects of general levels of inflation. Interest rates do not
necessarily move in the same direction or to the same extent as the prices of
goods and services.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's interest rate sensitivity is monitored by management through
selected interest rate risk measures produced internally and by the OTS. Based
on internal reviews, management does not believe that there has been a material
change in the Company's interest rate sensitivity from December 31, 1999, to
March 31, 2000. However, the OTS results are not yet available for the quarter
ended March 31, 2000. All methods used to measure interest rate sensitivity
involve the use of assumptions. Management cannot predict what assumptions are
10
<PAGE>
made by the OTS, which can vary from management's assumptions. Therefore, the
results of the OTS calculations can differ from management's internal
calculations. The Company's interest rate sensitivity should be reviewed in
conjunction with the financial statement and notes thereto contained in the
Company's Annual Report for the fiscal year ended December 31, 1999.
The following table presents the Company's interest sensitivity gap at March 31,
2000.
<TABLE>
<CAPTION>
After After
Six One Three
Within Months to to Over
Six to One Three Five Ten
Months Year Years Years Years Total
--------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable, net. $ 61,187 $ 40,065 $ 57,350 $ 61,293 $ 60,478 $280,373
Mortgage-backed
securities . . . . 10 10 43 49 524 636
FHLB Stock. . . . . . 1,911 - - - - 1,911
Investment securities 3,954 11,851 8,038 - - 23,843
Federal funds sold
overnight and other
interest-bearing
deposits . . . . . . 25,482 - - - - 25,482
--------- --------- --------- --------- ---------- ---------
Total rate sensitive
assets . . . . . . . $ 92,544 $ 51,926 $ 65,431 $ 61,342 $ 61,002 $332,245
========= ========= ========= ========= ========== =========
Interest-bearing
liabilities:
Deposits:
NOW accounts . . . . . $ 4,719 $ 4,719 $ 18,874 $ 18,874 - $ 47,186
Passbook savings
accounts. . . . . . . 1,406 1,406 5,623 5,623 - 14,058
Money market
deposit accounts. . . 6,716 6,716 26,864 26,864 - 67,160
Certificates of
deposit . . . . . . 93,652 33,565 20,981 4,709 99 153,006
--------- --------- --------- --------- ---------- ---------
Borrowings . . . . . . . 1,615 - - - - 1,615
--------- --------- --------- --------- ---------- ---------
Total rate sensitive
liabilities . . . . . $108,108 $ 46,406 $ 72,342 $ 56,070 $ 99 $283,025
========= ========= ========= ========= ========== =========
Excess (deficiency) of
interest sensitive
assets over interest
sensitive liabilities. $(15,564) $ 5,520 $ (6,911) $ 5,272 $ 60,903 $ 49,220
Cumulative excess
(deficiency) of
interest sensitive
assets. . . . . . . . $(15,564) $(10,044) $(16,955) $(11,683) $ 49,220 $ 49,220
Cumulative ratio of
interest-earning
assets to interest
-bearing liabilities . 85.60% 93.50% 92.53% 95.87% 117.39% 117.39%
Interest sensitivity gap
to total assets . . . -4.68% 1.66% -2.08% 1.59% 18.33% 14.81%
Ratio of interest-
earning assets to
interest -bearing
liabilities. . . . . . 85.60% 111.90% 90.45% 109.40% 61618.18% 117.39%
Ratio of cumulative
gap to total assets. . -4.68% -3.02% -5.10% -3.52% 14.81% 14.81%
</TABLE>
11
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities and use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4 Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
None
Item 6. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Exhibits
3.1 Charter of the Registrant*
3.2 Bylaws of the Registrant*
10.1 Employment Agreement with Ed C Loughry, Jr.**
10.2 Employment Agreement with Ronald F Knight**
10.3 Severance Agreement with Hillard C. Gardner**
10.4 Severance Agreement with Ira B. Lewis**
10.5 Severance Agreement with R Dale Floyd**
10.6 Severance Agreement with M. Glenn Layne**
10.7 Severance Agreement with Joy B Jobe**
10.8 Severance Agreement with William S Jones**
10.9 Severance Agreement with David W Hopper**
10.10 Cavalry Banking Key Personnel Severance Compensation Plan**
10.11 Cavalry Banking Employee Stock Ownership Plan**
10.12 Management Recognition Plan with William H. Huddleston II ***
10.13 Management Recognition Plan with Gary Brown ***
10.14 Management Recognition Plan with Ed Elam ***
10.15 Management Recognition Plan with Frank E. Crosslin, Jr. ***
10.16 Management Recognition Plan with Tim J. Durham ***
10.17 Management Recognition Plan with James C. Cope ***
10.18 Management Recognition Plan with Terry G. Haynes ***
10.19 Management Recognition Plan with Ed C. Loughry, Jr. ***
10.20 Management Recognition Plan with Ronald F. Knight ***
10.21 Management Recognition Plan with William S. Jones ***
10.22 Management Recognition Plan with Hillard C. Gardner ***
10.23 Management Recognition Plan with R. Dale Floyd ***
10.24 Management Recognition Plan with David W. Hopper ***
10.25 Management Recognition Plan with Joe W. Townsend ***
10.26 Management Recognition Plan with M. Glenn Layne ***
10.27 Management Recognition Plan with Joy B. Jobe ***
10.28 Management Recognition Plan with Ira B. Lewis, Jr. ***
10.29 Management Recognition Plan with Elizabeth L. Green ***
10.30 Management Recognition Plan with James O. Sweeney, III ***
13 Annual Report to Stockholders ****
21 Subsidiaries of the Registrant ****
27 Financial Data Schedule
* Incorporated herein by reference to the Registrant's Registration
Statement on Form S-1, as amended (333-40057).
** Incorporated herein by reference to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1997, as filed with the
Securities and Exchange Commission on March 30, 1998.
*** Incorporated herein by reference to the Registrant's Annual Meeting
Proxy Statement dated March 15, 1999, as filed with the Securities and
Exchange Commission on March 15, 1999.
**** Incorporated herein by reference to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1999, as filed with the
Securities and Exchange Commission on March 27, 2000.
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the quarter ended March
31, 2000.
12
<PAGE>
Pursuant to the requirements of section 13 or 15(d) of the Securities Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
CAVALRY BANCORP, INC.
Date: May 5, 2000 By: /s/ Ed C. Loughry, Jr.
--------------------------
Ed C. Loughry, Jr.
Chairman of the Board
of Directors
Chief Executive Officer
Date: May 5, 2000 By: /s/ Hillard C. Gardner
-------------------------
Hillard C. Gardner
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
13
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0001049535
<NAME> CAVALRY BANCORP, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 15269
<INT-BEARING-DEPOSITS> 25482
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 23843
<INVESTMENTS-CARRYING> 636
<INVESTMENTS-MARKET> 629
<LOANS> 280373
<ALLOWANCE> 4194
<TOTAL-ASSETS> 364527
<DEPOSITS> 320969
<SHORT-TERM> 526
<LIABILITIES-OTHER> 2133
<LONG-TERM> 1089
0
0
<COMMON> 11145
<OTHER-SE> 28665
<TOTAL-LIABILITIES-AND-EQUITY> 364527
<INTEREST-LOAN> 6128
<INTEREST-INVEST> 302
<INTEREST-OTHER> 549
<INTEREST-TOTAL> 6979
<INTEREST-DEPOSIT> 2978
<INTEREST-EXPENSE> 3108
<INTEREST-INCOME-NET> 3871
<LOAN-LOSSES> 74
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3686
<INCOME-PRETAX> 1455
<INCOME-PRE-EXTRAORDINARY> 1455
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 828
<EPS-BASIC> 0.13
<EPS-DILUTED> 0.13
<YIELD-ACTUAL> 4.68
<LOANS-NON> 219
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 4060
<ALLOWANCE-OPEN> 4136
<CHARGE-OFFS> 26
<RECOVERIES> 10
<ALLOWANCE-CLOSE> 4194
<ALLOWANCE-DOMESTIC> 4194
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
